Inflation forecasts in the eurozone have been slashed again by the European Commission to 0.5%, around half the rate of inflation forecast only last November and well below the ECB’s target of 2.0%, prompting further pressure on the ECB to add stimulus. Economic growth is tipped to rise slightly to 1.7% from 2015’s 1.6% but this is lower than the 1.8% growth also forecast in November.
The eurozone faces strong headwinds from deflating emerging market economies, terrorism, a surging refugee crisis and other geopolitical risks. It also forecast a “disorderly adjustment” in China and the likelihood of higher interest rates in the US.